Retention Ratio

When The Spa For Second Wives gives enemas, they like the cleansees to hold them for at least 20 minutes. Yes, sometimes there are accidents. But they track the rate carefully.

"Retention rate" as a financial metric usually applies to the duration in which subscription businesses keep customers paying that 30 bucks a month for, um, dating advice, after they have signed them on for the first month. Like...there might be a free promotional month, a teaser...and the company will have spent, say, $180 to get that first month-customer after a gajillion dollars on banner ads and Google and billboards and TV ads.

Then the big question: can the company retain them for at least 7 months to have revenues of $210 and (net of credit card costs and call center service costs and server costs and so on) break even? Each month, the service with now 100,000 customers loses 6,000 of them. They either met someone and are off to get married, or they decided they hated the service, or they found The Liberator and were going to go solo.

So, in this month, the company's retention ratio was 94%. Sound good? Well, it means that, over the course of the year, they'll lose 6% of their subscribers every month. If you compound this number, it means that they'll have less than a third of the subscribers they started with if they don't continue to market aggressively and bring on new subs. Tough business once you have to buy marketing with such high churn rates. Maybe they should add a background-check premium service for another 5 bucks?